ZeroFox Holdings (NASDAQ:ZFOX) dips 11% this week as increasing losses might not be inspiring confidence among its investors

Even the best investor on earth makes unsuccessful investments. But it would be foolish to simply accept every extremely large loss as an inevitable part of the game. We wouldn't blame ZeroFox Holdings, Inc. (NASDAQ:ZFOX) shareholders if they were still in shock after the stock dropped like a lead balloon, down 75% in just one year. A loss like this is a stark reminder that portfolio diversification is important. We wouldn't rush to judgement on ZeroFox Holdings because we don't have a long term history to look at. Furthermore, it's down 47% in about a quarter. That's not much fun for holders.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

See our latest analysis for ZeroFox Holdings

Given that ZeroFox Holdings didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last year ZeroFox Holdings saw its revenue grow by 99%. That's a strong result which is better than most other loss making companies. So on the face of it we're really surprised to see the share price down 75% over twelve months. Something weird is definitely impacting the stock price; we'd venture the company has destroyed value somehow. We'd recommend taking a very close look at the stock (and any available forecasts), before considering a purchase, because the share price is not correlated with the revenue growth, that's for sure. Of course, investors do over-react when they are stressed out, so the sell-off could be unjustifiably severe.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free report showing analyst forecasts should help you form a view on ZeroFox Holdings

A Different Perspective

ZeroFox Holdings shareholders are down 75% for the year, even worse than the market loss of 8.3%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. The share price decline has continued throughout the most recent three months, down 47%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 3 warning signs for ZeroFox Holdings (1 doesn't sit too well with us) that you should be aware of.

Of course ZeroFox Holdings may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.